Reading The Road Ahead 19 Years Later – Chapter 3: Lessons from the Computer Industry

It’s been nearly fourteen years since Bill Gates resigned from his position as Microsoft CEO. He was succeeded by Steve Ballmer, who recently announced his own retirement. In the intervening years, the computer revolution opened a new front: mobile and connected devices.

The Road Ahead was published nearly five years before Gates would pass the torch and during that time the computer industry would transform from one of discrete machines to one of networked computing. The Internet and, as Gates says, the “information highway” would become a standard communication method in homes alongside telephone service and cable TV. In chapter three, Gates looks back on his time in the computer industry. A time when the PC merely entering the home was ending and the beginning of the computer becoming a terminal that can access all the information in the world.

Gates looks back on his time at Microsoft from the mid-90s when Microsoft, Windows, and Intel seemed to be an unconquerable alliance of strength. As Homer Simpson might say “You hear me? No comeuppance!” Given the current view of Microsoft: lumbering, out of touch, and suffering from a failure of leadership, Gates’ observations could serve as a lesson to every member of the leadership at the company he founded.

Success is a lousy teacher. It seduces smart people into thinking they can’t lose. And it’s an unreliable guide to the future. What seems the perfect business plan or latest technology today may soon be as out-of-date as the eight-track player, the vacuum-tube television, or the mainframe computer. I’ve watched it happen.

There’s a philosophical aspect to Gates’ perception of his industry: he wanted to learn the lessons of those who failed and take from them the knowledge to remain strong. Recounting the stories of Digital Equipment Corporation (DEC) and Wang Laboratories, Gates tells stories of triumph and tragedy. Companies that began as young, innovative, and inspiring (both to attract customers and create a desire among workers to join and be part of their success) turned a corner and became the followers rather than the leaders. Their visionary founders suddenly looked like they were standing still as new hotshots emerged.

Gates lists “Apple, Compaq, Lotus, Oracle, Sun, and Microsoft” as new companies that rose from nothing to topple giants. An interesting list today. Since 1995, Compaq merged with HP, Lotus was absorbed by IBM, and Sun was acquired by Oracle. Apple, of course, became old but then reinvented itself with the iMac, iPod, iPhone, and iPad, making Steve Jobs the visionary leader he is remembered as.

What about Microsoft? Well, Microsoft still makes money. Lots of it. But it is not the company on people’s lips. It is not the place young people want to work. It’s the company that makes the products people have to use for work (Microsoft Office), the Xbox, and Windows. These are successful products, no doubt about it, but don’t provide enough thrust to fully escape the dangerous situation Gates observed in other companies. Even the Xbox is more of the exception that proves the rule than a real sign that Microsoft is adapting.

Microsoft grew into a powerhouse because it’s software became the standard with which everyone wanted to ensure compatibility. Gates talks about Microsoft BASIC and the power of the de facto standard emerging from the marketplace, like compact discs replacing vinyl records and QWERTY becoming, essentially, the only keyboard layout. MS-DOS would follow this same path through the licensing deal with IBM. MS-DOS became the most attractive operating system on the large player in the market and others then followed suit.

While this discussion of de facto standards and history is interesting, what’s really fascinating is to look at a few comments Gates makes that have some meaning on Microsoft’s current situation.

In terms of flexibility, Gates uses an example that jumped out at me: “Given a choice between a beautiful, handcrafted mailbox with an opening that would accommodate only one size envelope, and an old carton that everyone routinely dropped all mail and messages into, you’d use the one with broader access. You would choose compatibility.”

Microsoft currently has a problem of operating system abundance: Windows 8.1, Windows RT, and Windows Phone 8 are all fighting for the Windows throne. All use the new Metro design language full of flat shapes and bold colors. Windows 8.1 is the operating system for laptops and desktops, RT is the Windows for ARM processors (used on the Surface RT, though not the Intel-powered Surface Pro), and Phone is self explanatory. Microsoft has crafted three mailboxes that each serve a separate, but overlapping, market segment.

The Xbox is also running a flavor of Windows but the access to that platform is much more restrictive than any of the traditional Windows platforms because game consoles are their own beast.

Gates’ proud statement that “[a]nyone can develop application software that runs on the Windows platform, without having to notify or get permission from Microsoft” is potentially under fire these days from the app store model. App stores can put a barrier between creators and customers. Apple enforces this idea of a curated experience more than Google, Amazon, and Microsoft – and can deny an app admission or request changes for any variety of reasons – but potentially a world where all software must approved by the operating system creator is creeping up on us. While HTML5 and webapps can continue to fulfill the promise of “write once, run anywhere” native software will always exist.

Approval by an appstore can raise quality and ensure compatibility, but it can put a limit on innovation if the software company running the store is calling the shots. As MS-DOS was transitioning to Windows 95 and Windows NT in 1995, Gates described almost perfectly the situation Microsoft is facing today, with the Windows 7 / Windows 8 transition:

Existing users would not upgrade and we wouldn’t get any new ones. Our revenue would fall and many more companies would compete to take our place…You can’t rest on your laurels, because there is always a competitor coming up behind you.

The saga of Metro, the Start menu leaving, somewhat returning, and potentially regaining prominence in the successor to Windows 8.1 is a sign that Microsoft can’t simply force the market to move with them.

Tablets and phone running iOS and Android (or Android-based FireOS) are the companies jumping to take advantage of Microsoft’s awkward transition from desktop computing to touch computing. Ubuntu is making a phone and tablet version of it’s Linux offering. Firefox is making a phone operating system. Customers want the Windows they know (Windows 95 through Windows 7) and not the new Metro UI.

Bill Gates left Microsoft before it’s leadership position was in jeopardy. Could he have seen these struggles coming in his own company or would Gates’ Microsoft, like DEC and Wang, have faltered anyway?